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Will Burlington Stores Gain The Most From Bed Bath & Beyond’s Bankruptcy?
Burlington Stores is on a new store growth path so Bed Bath & Beyond’s bankruptcy couldn’t have come at a better time for the off-price retailer.
CNBC reports that Burlington has reached a deal to take over the leases of 44 former Bed Bath & Beyond locations as part of the auction process. Burlington also acquired six additional leases for Bed Bath & Beyond outside of the auction.
Many of the former Bed Bath & Beyond boxes are in prime locations, according to Bill Read, executive vice president at Retail Specialists.
“In aggregate, the Bed Bath & Beyond locations were some of the best that I’ve seen become available. They’re usually in large community centers with Target as an anchor and multiple other desirable anchor tenants in the shopping center,” Mr. Read told CNBC.
Burlington, with its 50 lease takeovers, has shown the greatest interest in Bed Bath & Beyond’s real estate assets. Michaels (nine), Haverty (four), Macy’s and Barnes & Noble (one each) have also assumed leases.
Michael O’Sullivan, Burlington CEO, speaking last month on the off-price retailer’s first quarter earnings call said plans were in place to open 70 to 80 new net stores this year after relocations and closures are factored in.
He said that Burlington has a history of picking up leases from bankrupt retailers including Circuit City, Linens ‘n Things, Sports Authority and Toys “R” Us. Future bankruptcies, he said, were “likely to have a significant impact on the availability of attractive new store locations” going forward.
“We have an ambitious program for the expansion of our store network and the relocation of some of our older, more tired and less productive stores. So I think this new store pipeline, the stronger new store pipeline is really going to help us to execute on this program over the next several years,” said Mr. O’Sullivan.
“Some of our best stores were created from carved-up, Kmart or Sears locations. My point is that we have a team with a lot of experience in assessing the suitability and evaluating the potential economics of locations that emerge from these types of bankruptcies and then negotiating for or going after those,” he said.
Burlington has increased flexibility when sourcing new locations based on a new smaller store prototype rolled out in recent years. The new format stores measure around 25,000 square feet compared to its typical 47,000 square foot box.
Discussion Questions
DISCUSSION QUESTIONS: What will the acquisition of Bed Bath & Beyond’s stores mean for Burlington and its place in the apparel retailing space? Are other retailers missing business opportunities by not picking up leases left over by bankruptcies such as Bed Bath & Beyond’s?
Poll
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Location, location, location. I suspect that companies like Burlington have probably snapped up some of the best locations available from the demise of BB&B. They have the momentum, resources, and now the opportunity to capitalize on this opening in the market. But, each real estate investment requires research and analysis. It’s worth it for any retailer interested in growth to look at what’s available and evaluate locations for their potential.
It sounds like Burlington picked and chose, rather than just taking them all and sorting through later, which is smart – there are some locations where there may be some overlap with existing Burlington locations. But “borrowing” another company’s location strategy is par for the course in retail. Why spend the money on all that analysis when you can just fast-follow someone else who is doing that work? Bed Bath and Beyond wasn’t a failure of location, it was a failure of omni investment. If Burlington can benefit from it, more power to them!
Burlington is smart to seize on Bed Bath & Beyond’s store shells. They are a great fit and the adjacencies will give Burlington a nice boost. But it’s not as if other retailers are hurting for real estate options and not everyone is in growth mode when it comes to physical store openings.
Mr. O’Sullivan is showing cunning expertise in the lease acquisition of Bed, Bath & Beyond stores. He’s right, most of these locations are in prime spaces with traffic-driving anchor retailers. Couple this with consumers looking for deals from off-price stores, and Burlington stands to gain a lot.
Well, they’ve carved up this carcass in fascinating ways. Overstock took the name, and Burlington took the stores. Burlington just opened its first store in the Miami area – right near me. The BBBY store is about 40 blocks north of that, so I assume they’ll pass on that one.
My main issue with all these Burlington openings is honestly, if I hadn’t lived in Boston for many years, I would have NO idea what the store is about. I just would have done something different to make the brand a “wanna have” before committing to stores.
There’s something not right here….but I guess we’ll find out soon enough.
I love the way you put this.
I always thought for many years, is that Burlington was a regional chain that sold coats. This will be interesting to see if they are able to pick up the BBBY business.
My opinion is I don’t think they will….
My local BB&B was located a few doors down from a Walmart, so presumably foot traffic was not a problem. And if a retailer can’t compete with and leverage off of Walmart traffic…well, now we know what happens. Burlington should be able to not only tap into Walmart traffic, they may generate a little extra traffic on their own. This strip mall and the local community just experienced a win/win.
Despite its issues, Bed Bath & Beyond had quite a few stores in excellent locations where foot traffic is strong because of adjacencies to other popular retailers like Target. Burlington has cherry picked the best for its expansion. This will help the company expand its reach and visibility which is currently some way below that of the two main off-price players, TJX and Ross.
Mr. Sullivan surely is smiling. He just got 44 off-price leases for his off-price retail company.
These leases will give Burlington a chance to attract new shoppers. Let’s hope that they can execute well enough to get past the introduction.
Many of the former Bed Bath & Beyond boxes are in prime locations
This would seem to hold the key to the answer, since the BBB heritage itself probably doesn’t count for much. Burlington’s big issue, I think, is the seeming inability of offprice to adapt to online; and while the store acquistion is relatively small, still, it makes the commitment to physical spaces even more pronounced.